You are here: Home - Retirement - Retirement planning - News -

Call to scrap triple-lock guarantee – former pensions minister

Written by: Paloma Kubiak
The former pensions minister Ros Altmann has called for one element of the triple-lock guarantee on state pensions to be scrapped from 2020, turning it into a ‘double lock’ instead.

Since 2010, state pensions have risen annually by the higher of inflation, average earnings or a minimum of 2.5%.

The basic or old state pension is currently set at £119.30 per week, having last risen by 2.9% based on the higher earnings figure, while the new flat rate state pension which came into effect in April 2016 stands at a maximum of £155.65 per week. Both come under the triple lock guarantee.

However, those who receive the additional state pension aren’t protected by the same safeguard. Instead their pensions are increased in line with inflation.

Baroness Altmann told the Observer newspaper that the minimum 2.5% element of the guarantee should be scrapped from 2020 as it’s simply too costly, and pensions should be protected by the higher rate of inflation or average earnings growth instead.

Andrew Pennie, head of pathways at Intelligent Pensions, said: “The triple lock and the current low inflation economy mean that state pensions are increasing at 2.5% per annum and therefore growing in real terms.

“As Ros points out, over time this can’t be sustainable and why should state pensions grow in a low inflation economy but remain flat in a higher inflation economy?  Given that inflation and growth in average earnings could become negative, we believe a double lock would be unacceptable and perhaps the triple lock can remain, and is in fact necessary, provided the 2.5% escalation rate is reviewed and better reflects current economic conditions.”

Pennie added that the triple lock is part of the government manifesto and has become something of a “Tory flagship policy”, protecting the UK’s OAPs during times of need.

“To break the triple lock becomes another broken political promise, more damaging because it would likely cost votes. However, as the cost of providing it continues to increase and the government comes under financial pressures from elsewhere, it will be difficult for the triple lock to continue in its current guise.”

Kate Smith, head of pensions at Aegon, said she welcomed the government’s confirmation that it has no plans to remove the triple lock ahead of 2020, but said there is much distrust of the government’s commitment to state pensions among the different generations.

In recent research, it found that one third of the UK population believed the state pension will be at a less generous level, while a tenth believed there will be no state pension at all when they reach retirement. Further, 70% do not trust the government to make decisions fairly between workers and retirees when reforming state pensions.

“People need trust in state pensions so they can determine how much they need to save in addition to meet their retirement aspirations. It’s important that state pension policy is fixed for at least five years, and in some regards for far longer, giving certainty to pensioners and savers alike.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get in the second lockdown?

News and updates on everything to do with coronavirus and your personal finances.

Everything you need to know about being furloughed

If you’ve been ‘furloughed’ by your company, here’s what it means…

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Car and home insurance premiums on the up

Car insurance premiums have started to rise again but they’re “less than expected” while home insurance costs have also increased...